How to start a Chinese local Bank Account for Your Businesses
Planning out the bank account opening for Chinese businesses and considering to incorporate a Chinese company, even though you need to register business first but also need a local bank account to operate finances and transactions. And this procedure still need a long time application and documents need to submit to Chinese banks and foreign exchange department to approval.
As a foreign owned enterprise registered in Mainland China, will obtain the approval of opening bank accounts supervised by the Center Bank of People’s Republic of China and the local Foreign Exchange Department.
What Required Documents Need to be Prepared
- Company stamps, financial seal, and legal representative stamp.
- Business License approved by local government of registration.
- Certificate of registration of foreign owned enterprises.
- Notarized passport of legal representative.
- Application and forms of opening bank account.
Normally there are 5 types of bank accounts you can open in China
Basic RMB account
The Functions of basic RMB account include online internet banking payment and transaction, and as an international account can receive payments from oversea and local customers. And the same time, you can use this basic RMB account to open Wechat Pay and Ali pay accounts for your online electronic commerce businesses.
Basic account can make payments for daily operations, such as monthly salaries, social insurance, housing fund, office rent, purchase goods and service fees of suppliers and marketing, reimbursements of traveling costs other corporate expenses.
Also, basic account can receive payments from customers ( local customers must use RMB transactions and foreign customers can use Euro, USD and other foreign transactions of currency ).
Basic can receive exchanged registered capital from capital account.
Brief of Basic Account
Sometimes, if China company does not have enough fund to develop local market, such as: loss or registered capital is insufficient, basic account also can receive payments from shareholder/parent company, but if shareholder transfers payment to basic account rather than capital account, whole exchanging process will be required to pay tax.
You have to remember that, once you use basic account to pay daily operations, must provide relevant original invoices issued from local suppliers ( known as: fapiao ).
|IN – Receivables:||OUT – Payables:|
|Receive exchanged registered capital||Make payments to local suppliers, office rent, expenses, etc.|
|Receive RMB payments from local customers||Pay salary, social insurance, housing fund, reimbursement|
|Receive foreign currencies/payments from foreign clients||Acquisition, re-investment, dividend, etc.|
The function of registered capital account is easy understanding, only can receive investment payment or registered capital from shareholder’s accounts. Because RMB is the legal tender in mainland China, registered capital amount as foreign currency can not be used in Mainland. So you must ask your Chinese local accountant going to bank and Foreign Exchange Department to submit the application of currency exchanging, then registered capital can be exchanged to RMB currency as your day to day operations.
Brief of Capital Account
Known as: registered capital account, only has one function, receive registered capital from shareholder(s)’s oversea account with USD currency. USD registered capital must be transferred from shareholder/owner account opened in their home country, and must input the Payment Purpose ( INVESTMENT CAPITAL ) when foreign shareholder(s) making payment to Chinese Company’s Capital Account. After being exchanged to RMB, capital amount will be transferred to basic account for your daily operations. Exchange rate depending on daily foreign exchange rate published by Center Bank of People’s Republic of China.
Operating Principle of Capital Exchanging
Process needs 2-3 weeks:
1st. Foreign Shareholder(s) Transfer Registered Capital to China Company.
2nd. China Company Receive Registered Capital with USD Currency within 2-5 Working days.
3rd. Chinese local accountant submit application of Currency Exchanging to the Foreign Exchange department and Bank.
4th. Foreign Exchange Department will Verify and Approval. 2 Weeks.
5th. Obtain Approval, USD capital will be exchanged to RMB currency and be injected to Basic Account.
The function of taxpayer account is required to open in local banks, can bind with basic RMB account, foreign enterprises can use this account to pay taxes each month.
Normal accounts / General accounts
If your Chinese businesses have many departments in the future, you may need opening normal accounts for each department.
Foreign currency account
You can open this account for each currency, but need submit a lot of legal documents for the proof of credit for your Chinese companies.